VAT rise comes into effect today

VAT increases today from 17.5% to 20% amid warnings the hike will lead to job losses.

VAT increases today from 17.5% to 20% amid warnings the hike will lead to job losses. Shoppers flocked to the stores yesterday in a last-minute bid to beat the VAT rise. Although food and children’s clothing are not affected by the increase, electrical goods, meals out in restaurants and household essentials such as washing powder will be hit. The move by the Government is designed to raise £13 billion a year by the end of the parliament in a bid to move the country towards a faster economic recovery. Critics have predicted the rise will affect consumer spending and will have a knock-on effect on the jobs market. Chancellor George Osborne has said the measures outlined in the emergency Budget are ”tough, but fair” and warned the defict had to come from somewhere. But Labour leader Ed Miliband said: ”By taking money out of the economy, they put jobs and growth at risk. The VAT rise alone, people tell us, will cost up to 250,000 jobs up and down this country, at a time when unemployment is already rising.” The Federation of Small Businesses (FSB) has warned it will have to pass on the increase in VAT to customers because small firms won’t be able to absorb the full cost in the way larger businesses can. It has called for the VAT threshold for small firms to be increased from its current £70,000 mark to £90,000, claiming the difference could mean the creation of 35,000 jobs.